Steve Bolze: Investing in the Future of Electricity

The world is in the midst of a major power shift. Not political power, but actual electricity power being generated by an increasingly diverse and distributed range of sources — from natural gas to renewables.

This unprecedented transformation in the global power industry toward a low-carbon environment raises significant challenges for countries seeking to balance the need for sustainability, energy security and competitiveness. Yet it also raises tremendous opportunities for investing in innovative technologies that can help bring about more sustainable economic growth for countries and a higher standard of living for their people.

As leaders from the private and public sectors convene in Davos this week for the annual World Economic Forum, one pressing topic we’ll be discussing is what actions all of us can take to ensure we can continue to attract the investments needed to ensure a secure, sustainable power supply for people around the world.

It’s no small task — nearly $8 trillion in investment will be needed by 2040 in the more developed economies of the Organization for Economic Cooperation and Development (OECD) alone, according to the International Energy Agency (IEA). But it’s also the type of challenge that Davos excels at — bringing together some of the best minds to this Alpen retreat to devise creative solutions to seemingly intractable problems.

Indeed, amid concerns about meeting our power investment needs during last year’s Davos forum, we launched a Future of Electricity initiative to determine the most effective ways to transform the electricity sector to a more sustainable, affordable and reliable system. This year, we unveiled a report that lays out some key recommendations for policy makers, regulators and businesses.

Some of the recommendations that I believe are most pertinent include: creating “level playing fields” to increase competition and innovation, developing stable policy to reduce investor risk, incentivizing efficiency investments from generation to the end consumer, and taking a holistic approach to ensuring system reliability.

This includes market mechanisms that incentivize reliable and dispatchable power capacity, as more intermittent renewable technologies such as wind and solar become increasingly important sources of electricity. There are a variety of different solutions, including fixed capacity payments or capacity auctions — what’s important is that there are clear signals to guide investment toward the right priorities.

The good news is that innovations in the development of natural gas and renewable energy sources are accelerating progress toward a low-carbon future. The shale gas boom in the U.S. has helped bring emissions down to some of their lowest levels in two decades, according to the U.S. Energy Information Administration.

Meanwhile, the latest gas turbine technologies are among the lowest cost ways to convert natural gas into electricity, offering new levels of efficiency and flexibility for renewables integration. At GE, we’re helping energy companies and grid operators like Électricité de France S.A. (EDF) smooth out the intermittent supply of renewables with high-efficiency gas turbines that can quickly ramp up to full power when solar energy and wind power aren’t available.

Renewables capacity has grown rapidly as costs have declined roughly 70 percent over the past 10 years, resulting in 10-fold growth. Renewables, including hydropower, now account for about a fifth of global electricity generation and are on pace to contribute a fourth of the world’s power by 2018. With the increasing diversification of available sources, power producers must find the most efficient mix of investment in renewable and conventional generation.

Meanwhile, utilities can improve efficiency and productivity by investing in Big Data and innovative hardware and software technologies. We’re helping producers like FirstWind increase output using Industrial Internet solutions like PowerUp, translating into more than $1 million in additional annual revenue per wind farm.

But businesses and governments can’t achieve sustainability alone — consumers also have an important role to play. Whether it’s as simple as installing LED lighting or becoming part of the growing “smart energy consumer” movement, using intelligent devices to manage their power usage.

We all have an obligation to future generations to invest in a more sustainable, affordable and reliable electricity system and provide a sound foundation for economic growth and a better quality of life. This report offers guidance on attracting investment to ensure we transition towards the electricity sector of the future.

Steve Bolze is President and CEO of GE Power & Water and co-Chair of the WEF Energy Utilities & Energy Technology community.